Data
This paper uses time series data on Bangladesh from the WDI databank to find the impact of FDI inflow on exports. We’ve considered the time period from 1976. Bangladesh became independent in 1971. Just after birth, the nation adopted an import substitution trade policy. And consequently, discouraged export oriented industrialization. And FDI was forbidden till 1976. In 1976, Bangladesh took newer policies and thereby trade openness began. FDI also started to arrive. That’s why, we’ve excluded the years before 1976.
Dependent Variable: Export, measured in US dollar.
Independent Variable: Foreign Direct Investment, FDI inflow measured in US dollar.
Methodology
Before explaining the methodology of data analysis it is important to
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Granger-casualty tests the hypothesis if one variable is useful in forecasting the change in another variable. Here, the time series variable ‘FDIBD’ would Granger–cause time series ‘X’ (exports) if it could be statistically established.
Results of the study suggests causality in both directions (i.e. ‘XBD’ depends on ‘FDIBD’ and ‘FDIBD’ depends on ‘XBD’). It may be mentioned that the main objective of this analysis is related to first one only. However, second causation also provides worthwhile information for further studies. Results of the analysis are given in Table-1. The results reject the null hypothesis (of no causality) and statistically prove causality between FDI and exports in both directions.
Cointegration Relationship Test
In spite of statistically significant Granger-causality between FDI and Exports, this test alone is not that strong to fully establish dependence of one variable on other. It, in fact, only establishes that explanatory variable leads the dependent variables- a necessary (but not sufficient) condition for an explanatory variable. For unbiased estimation of regression parameters another necessary condition is that the explanatory and dependent variables should have mutual cointegration. Granger-causality and cointegration together are thought to be
There is no doubt that increasing in international trade is supporting the economic growth across the world, raising incomes and creating jobs. However, international trade can also some create economic obstacles, such as the international context and the market policy and regulations of each country, and consequently it can be said that the effects would have positive and negative sides, and it is useful to mention all of them and to take them into consideration.
The Complete Idiot's Guide to Economics © 2003 by Tom Gorma Retrieved on February 27, 2012 http://www.infoplease.com/cig/economics/effect-imports-exports-gdp.html
Statistical and empirical analysis is something that is very valuable despite the application and system in question. This is true when the variables and facts are fairly straightforward and simple and it also holds true when the systems involved are very complex and large in nature. The latter is clearly the case when it comes to the impact and result of direct foreign investment in a given country. Such will be the point of empirical analysis for this report and the country that shall be used for the
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The approach that the authors take to this issue is to ask to quantitative questions. The first is "are there productivity spillovers from FDI to domestic firms?" and the second is "If so, how much should countries be willing to pay to attract FDI?" The authors note that
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The objective of this study is to investigate the causality relationship between inflation and unemployment in India. For this purpose we have used the standard econometric model of granger causality. But, before estimating the granger causality we must have check the stationary property of the variables. This is because if the variables are non-stationary then, the granger causality test may give misleading results. To test the stationary property of variables, we have used Phillips and Perron (1988). The result of unit root test is shown the table 2:
The main interest of this paper is identifying trade deflection, an increase in Thailand’s exports to other country i when facing a trade restriction imposed by Thailand’s trade partner; and identifying trade depression, a decline in Thailand’s exports to the third market when that country is targeted by trade restriction from another country.
While increase in exports is of vital importance, we have also to facilitate those imports which are required to stimulate our economy. Coherence and consistency among trade and other economic policies is important for maximizing the contribution of such policies to development. Thus, while incorporating the existing practice of enunciating an annual Foreign Trade Policy,
The dependent variable is denoted as variable of primary interest to the researcher as it provides a measurement of the effect of the independent variables. In this research, foreign direct investment (FDI) is the designated dependent variable where it indicates the outcome of the change brought about by changes in the independent variables.
This paper defines, and examines the role and importance of international trade. As many of us are aware, international relations between nations mean many things. International trade plays a major role in establishing those relationships. International trade can be described as the act of exchanging goods and services to and with other countries. It has a vast economic and political impact on the decisions that the government chooses to engross themselves in for the improvement of not just the country, but also its citizens. As the 1998 R. Kelly song says, “Money makes the world go round”. That is precisely what international trade is about. This paper not only goes into great detail about the meaning of international trade, but also how